Abstract The paper provides an overview of recent research on the economic and labor impact of offshoring IT services to low-cost destinations. The research identifies key determinants, recent trends, occupations affected, magnitude, and benefits of offshoring to the U.S economy. The analysis indicates that the current wave of offshoring involves IT services threatens mainly white-collar occupations in the low-income group, but is counterbalanced by job creation in the high-income sectors. The research argues that the jobs lost to offshoring are a negligible percentage; on the other hand, the reduction in costs of IT services due to offshoring will increase labor productivity, job creation, boost Gross Domestic Product, and further strengthen the U.S. economy.
Table of Contents
Abstract
1 Background
2 Definition of Terms
3 Determinants of OffshoreOutsourcing 4 Outsourcing and Productivity
5 Protectionist Measures
6 Conclusion
References
From the Paper "Traditionally, cost reduction has been the overwhelming motivation and perceived payback for outsourcing. While offshore outsourcing is not new (companies have been offshoring manufacturing for many years and reaping significant cost and productivity improvements), the offshoring of business processes is still in its infancy. In the past, outsourcing has often been used tactically, as a rapid and often short-term solution to a particular need or problem, which did not form part of an overall business strategy. The experience of manufacturing illustrated that when it is possible to do things cheaper elsewhere in the world, the work will migrate there. With the relentless pursuit of the lowest global costs, offshoring is getting institutionalized in many companies. So much that firms might resort to a strategic use of outsourcing by working with one or more suppliers in order to effect a significant improvement in business performance. This enables the firm to focus on those products that lie closest to the company's core capability set and consider jettisoning the rest. "
Abstract This paper examines how outsourcing to India can be very lucrative due to significant cost savings and many other beneficial factors surrounding the Indian software market. It discusses offshoreoutsourcing through a review of the article, "Inside Outsourcing in India", by Stephanie Overby. It examines how, in the article, two experienced entrepreneurs share their lessons and discuss the advantages and disadvantages of Indian outsourcing. This paper also explores the history and future of offshoreoutsourcing, as well as how to successfully plan, implement, and manage such a relationship.
Outline
Executive Summary
Introduction
History
Advantages of OffshoreOutsourcing Disadvantages of OffshoreOutsourcing Planning the Outsourcing Relationship
Implementing the Outsourcing Relationship
Managing in an Outsourcing Relationship
Current Affairs
Future
Conclusion and Recommendations
From the Paper "It is important to remember that outsourcing does not shift all responsibilities to service organizations. When stockholders, government agencies, customers and vendors demand answers to key questions, you can bet that they will not stop with the outsource service organization. In fact, most legal and fiduciary responsibilities cannot be shifted at all. The bottom line is this, when there is a serious problem, key questions to be answered, or operational shortfalls, the responsibility resides with management and not the service organization."
An analysis of the failing economics of international technology job markets in "Is OffshoreOutsourcing Worth the Loss of Its Jobs?" by Karen Gugliemo in 2007"Tech Target--CIO".
Abstract This paper explains that the basis of Gugliemo's article 'Is OffshoreOutsourcing Worth the Loss of Its Jobs?' reflects the growing economic disparity that is occurring at the domestic level in the United States and in Canada. The author points out that her research indicates the growing exponential rate of American and Canadian jobs that are being exported over to third world countries have greatly lowered wage rates, threatening the middle class in North America. The paper relates that another factor is the policy making-leverage that America wields over most third world countries supplying technology job markets in the global market. The author underscores that, since many of these jobs are being provided to economically impoverished countries, there is a marked disadvantage not only to the workers being exploited in these countries but also to the workers on the North American continent. This paper includes long quotations.
Table of Contents:
Summary
Discussion
Analysis and Critique
From the Paper "In Gugliemo's article, the issue of a vanishing middle class is a dangerous idea for native North American technology workers. When companies continually find that they can outsource jobs without government regulation, the country will find itself in a crisis. While the rich get richer, and the poor get poorer, where does the middle class go? Certainly, they would find themselves in the majority of the poor, which can constitute a real danger of stability in the country. Throughout history when the middle class is a missing link between the rich and the poor, civil strife will most likely ensue."
Abstract This paper discusses why outsourcing helps and protectionism hurts the United States' economy. It provides an overview of a series of articles and research papers which discuss the impact of offshoreoutsourcing on the American economy. It analyzes whether it is ultimately better for America to be challenged competitively or if it is more prudent to protect American industries.
Table of Contents:
Summary
OffshoreOutsourcing Has Become the Political Football of Choice
OffshoreOutsourcing Hits Iowans Hard
Evaluating Lou Dobbs' Commentaries on OffshoreOutsourcing Making American Manufacturing Lean: A Perspective
Conclusion
From the Paper "Instead, the author takes the approach of looking at the concepts of lean manufacturing as the true point of differentiation and long-term growth of American manufacturing. Link (2006) argues that efficiency and cost reduction through lean manufacturing techniques can actually forestall or even stop the outsourcing of jobs en masse. The other side of this argument however is that many Indian outsourcing companies including HCL, Infosys, Tata and others can deliver a 40% reduction in the costs of doing a complex task or process, which would ironically alleviate the pressure on companies to outsource their core business. The author tends to applaud the Toyota Production System too often, and could have made the entire article stronger by showing the ironies of Toyota themselves doing much of their outsourcing work on non-strategic parts of their business so they could focus on the core aspects of next generation auto development."
Abstract In this article, the writer introduces, discusses and analyzes the topic of the American business practice of outsourcing jobs offshore. Specifically, the writer discusses the cause and effect of this practice on the American economy, labor force, customer service, etc. The writer points out that outsourcing a variety of American jobs overseas has become common practice and that the cause of this practice is clear. The writer then explains that American wages are higher than offshore wages, and outsourcing, therefore, saves American companies money. The writer notes that the effects, however, are beginning to be noticed in a wide area, from customer service to job loss. The writer argues that outsourcing overseas may save companies money, but in the end, it places them in a negative light and indicates their lack of interest in protecting and enhancing America and the American economy.
From the Paper "Outsourcing has really taken off in the last few years. Thousands of American businesses routinely outsource customer service and other jobs to outsourcers in India, China, Russia, and other foreign companies. CBS News reports, "The U.S. government does not keep track of how many American jobs have gone overseas, but there are estimates that in just the last three years, as many as 400,000 jobs have gone to places like China, Russia, and India". In fact, outsourcing is on the rise, and it looks as if that trend will continue. Another expert notes, "The number of service sector jobs moving overseas is expected to reach 588,000 by 2005, up from 100,000 in 2000". This shift of jobs to overseas locations can create several negative affects to the country in a number of areas."
Abstract The paper discusses how many companies are lowering their costs by using offshoreoutsourced resources on a project-by-project basis. The paper explains that companies who are getting the best results from outsourcing are following three major strategies: saving money without impacting strategic direction, accessing specific skill sets of the outsourcers and selectively hiring the talent needed on a per-project basis. The paper provides a summary of the advantages and disadvantages of outsourcing.
Outline:
Executive Summary
How Companies Are Making IT Outsourcing Work
Advantages and Disadvantages of Outsourcing
From the Paper "All companies are asking their IT departments to reduce IT costs and head count, and this is hitting IT departments the hardest. Yet as the research in this paper shows, the majority of jobs being outsourced are those that deal with repetitive, mundane and easily replaceable processes. These areas of any company are ripe with cost reduction strategies. The Draconian notion of trimming all IT costs is unrealistic; rather the focus on fine-tuning strategic benefits is critical. These mundane and easily automated (and therefore outsourced) tasks account for 19% of the IT budget by many industry sources, making them an attractive target for cost savings."
This paper is a complete quantitative research project, with an extensive literature review, that explores the impact of outsourcing on the American worker and the American economy.
Abstract This paper explains that the study investigates the impact of outsourcing specifically on white collar workers in the high-tech industry, who are increasingly becoming more affected by the phenomenon of offshoreoutsourcing. The author reports that the methodology for the study was a questionnaire, using a 7 point Likert scale, which was sent to 65 randomly selected computer programmers employed in the U.S. at Microsoft, Cisco and Apple. The paper indicated that the quantitative research and the literature review conclude that outsourcing is a serious issue, which impacts American workers and the American economy; however, it is clear that the practice of outsourcing is here to stay. The paper includes the questionnaire and many quotations, tables, figures and graphs.
Table of Contents:
Introduction
Context of the Problem
Statement of the Problem
Research Questions
Significance of the Study
Limitations of the Study
Review of the Literature
Globalization
Politics of OffshoreOutsourcing Trends in OffshoreOutsourcing Most Popular Countries for OffshoreOutsourcing Impact of OffshoreOutsourcing on the American Worker
Impact of OffshoreOutsourcing on White-Collar American Workers
The Impact of Outsourcing on the American Economy
Security and Cultural Barriers Associated with OffshoreOutsourcing The Future of offshoreOutsourcing Methodology
Methodology Overview
Methodology Survey
Subject Population
Data Collection
Organization of the Study
Results
Discussion, Conclusion, Implications
Appendix
Survey
Letter Sent to the Appropriate Managerial Personnel
Low Labor Cost Chart
Number of U.S. Service Sector Jobs Projected to Shift Offshore Share of Projected American Jobs Moving Offshore Workers Displaced From and Reemployed in Full-Time Wage and Salary Jobs
Hourly Compensation Costs
Hourly Compensation Costs for Production Workers
Employment Cost Index
Employer Cost for Employee Compensation
From the Paper "The literature review asserts that a great deal of the focus on outsourcing began as a purely political issue. The literature review indicates that politicians used the slowdown in the labor market, to assert that the cause of the slowdown was offshore outsourcing. The literature review also found that many major media outlets had many reports on the topic of outsourcing, which may have distorted the true facts concerning the nature of outsourcing on workers and the economy. On the other hand, many years after that election, offshore outsourcing seems to be an issue for many American workers."
Abstract This paper explains that the needs to finding a competitive advantage through better process management and to increasing operations management efficiencies are catalysts driving companies globally to seek out offshoreoutsourcing partners. The author points out the benefits, which have made offshoring increasingly critical to a company's strategic plan. However, there are major impediments to implementing offshoring and outsourcing strategies, which include the clash of cultures between the outsourcer and its offshore partner, the lack of consistency in how each view time as a resource, and the lack of consistency in terms of quality standards. The paper offers guidelines for managing this strategy and business examples.
Table of Contents:
Introduction
Offshoring has Progressed Past Cost Reduction
Strategic Use of OffshoreOutsourcing for Project-Based Programs
Comparing Offshoring Delivery Models
Evaluating Factors for Defining an Offshore Model
Advantages and Disadvantages of OffshoreOutsourcing Conclusion
From the Paper "The primary motivation for many companies to offshore production and services or both is the ability to significantly drive down their wage costs, yet there are also the process costs that can also be significantly reduced. Take for example the direction of Infosys to offer outsourcing services for industrial manufacturers' order management systems, a task so critical to the overall functioning of a company, and yet Infosys is getting new clients throughout the rust-belt region of the US, in traditional industrial manufacturers."
Tags: process-integration, partner, project-by-project, guideline, time
Abstract The paper explains that Armstrong Holdings could not remain competitive for very long if it did not offshore some or all of its manufacturing. The paper then also points out the risks involved with such a strategy and warns that Armstrong must be diligent in not exporting proprietary knowledge or techniques or it risks being undermined by foreign competitors who acquire its intelligence.
Outline:
Overview
Offshoring/Outsourcing & Globalization
Effects of Global Outsourcing & Off-shoring
Conclusion
From the Paper "Outsourcing, and its sister strategy of off-shoring, are by-products of globalization and the U.S. market has been deeply impacted by globalization. Armstrong Holdings (Armstrong) itself utilizes offshoring strategies since it has long maintained a manufacturing facility in Mexico. The U.S. economy has been one of the global economy's hardest hit by some of the side-effects of globalization: outsourcing and off-shoring. Outsourcing or the contracting out of functions previously handled in-house, and off-shoring, which is the use of overseas firms to provide a product or service previously handled nationally, both contribute to shrinkage of jobs and manufacturing (Globalization, 2005, p.1). Armstrong, in order to maintain its competitive edge, like most other companies availing themselves of these strategies, is merely taking advantage of a market strategy."
Abstract An opinion paper which argues that offshoring is not the problem with the American job market. The writer claims that CEOs in companies have only one interest in mind--to inflate the company's profit and not to increase wages when due. The writer argues that outsourcing jobs off American soil is not the cause of the job market crisis, but it is rather the fact that wages are too high in America.
From the Paper "Statistics indicate that offshoring does not substantially affect American jobs. According to the Department of Labor Statistics (US Department of Labor [DOL], 2004a) over the past twenty four years information jobs and manufacturing jobs are the only sectors that have had a net loss in jobs, and if you look further back in the data you would see that manufacturing jobs have had a turbulent cycle of boom and bust since 1939. Even with the job losses the hourly rate of manufacturing employees has steadily risen since records have been taken."
Abstract This paper discusses how outsourcing is a concept that has evolved greatly in the field of business and has been used as a common word since the 1990s by management. It looks at how outsourcing is considered to be a step of delegating a task to an outsourced company that specializes in doing such tasks and has the capabilities to do so unlike the company that acts as a client to the outsourcing company.
Outline:
Types of Outsourcing Services
Why Should Outsourcing Be Carried Out?
When Not to Outsource Advantages of Outsourcing Disadvantages of Outsourcing Conclusion
From the Paper "Outsourcing is done for those situations which the organization feels that it can not handle on its own. There could be situations where a company may be unable to create a particular budget for a project and neither allocates the resources for that project. In this case, the solution becomes outsourcing the project. A major reason why outsourcing is done is that when an organization faces a great challenge with an uncooperative Information Technology department. If the organization's management is unable to convince and persuade the department to deliver on time, the organization needs to outsource. "
Abstract The paper looks at research that shows how the vast majority of job losses do not involve the foreign relocation of work at all. The paper addresses the positive effects of outsourcing, including the creation of additional domestic jobs and its benefits to international trade. The paper provides a case study analysis regarding outsourcing in India and concludes that outsourcing is likely to be a good thing for the U.S. economy and for international trade.
Outline:
Introduction
Reasons for Outsourcing Actual Rate of Job Loss Attributable to Outsourcing Positive Domestic Effects of Outsourcing Benefits to International Trade
Outsourcing Case Study in India
Conclusion
From the Paper "In the past few years the United States economy has emerged as a growing economy, dramatically and irreversibly impacting the global market. One of the most significant impacts of this growing economy lies in the area of outsourcing to foreign countries. The United States government and large corporations view outsourcing as a method of enabling international trade to prosper and allowing industries to grow. This economy has an international impact in regard to the recent trend in outsourcing and off-shoring; many domestic headquartered companies are now turning to outsourcing manufacturing and production to drive down costs."
Abstract This paper elaborates a model showing that outsourcing can benefit a country through higher productivity growth and increased employment. Part I discusses the problems regarding the precise definition of outsourcing and presents a case for using the definition adopted in this paper. Part II provides an overview of literature presenting both theoretical and empirical data related to the subject. Part III of this paper creates a model of the economy that engages in outsourcing with all theoretical assumptions and conclusions stemming from it. Part IV bases on this theoretical framework to determine which groups are expected to gain, which groups are expected to lose, and what needs to be done to turn losers into gainers. Part V is a case study of outsourcing from the European Union as a test of the paper's theoretical framework. The paper examines whether the implications of the model hold true in the case of the European Union and sees if the model can explain why certain implications do not hold in real life. Finally, in Part VI the paper gives a brief discussion on economic restructuring policies that are to be adopted in the European Union in order for it to maximize its gains from outsourcing.
From the Paper "Perhaps the main reason for the broadness of the definition of outsourcing is that the concept had changed over time. Up to the early eighties, and dating back to the nineteenth century, outsourcing has been understood as a firm's purchase of intermediate inputs from outside, whether domestically or abroad. Such, the American Heritage Dictionary defines it as "The procuring of services or products ... from an outside supplier ... in order to cut costs." In such a case, a car manufacturing company in the U.S. that purchases car tires from another firm is said to outsource its tire production. However, with the development of foreign trade, economists became to refer more and more often to "an outside supplier" as the one outside the country, speaking of outsourcing as specifically purchasing intermediate inputs from abroad."
Abstract This paper presents a trend analysis of the outsourcing of jobs in American companies. It looks at the impact of the exodus of jobs from the United States as the result of outsourcing or offshoring. It looks at outsourcing of non-core services as the largest outsourcing activity. The paper also examines trends of free trade and globalization of the economy.
From the Paper "With companies paying greater attention to costs and bottom lines today than in the past many are turning to a new paradigm called outsourcing ..."
Tags:outsourcing, globalization, information technology
Abstract The paper reviews the history of outsourcing as a business strategy and how it works. The paper explores the pros and cons of outsourcing and proposes that outsourcing, when implemented correctly, will result in a competitive advantage for the business firm. The paper then examines some specific case studies of companies who utilize outsourcing and highlights the pros and the cons of their business decisions. The paper also considers future market trends and shows how a substantial amount of companies that ventured into outsourcing have profited.
Outline:
Executive Summary
Introduction
Hypothesis
Future Trends and Conclusion
From the Paper "Ever since the ancient times people have been specializing in certain areas, making them better and faster at what they do. Contrary to what some may believe, outsourcing is nothing new. There is no precise date or time that indicates the beginning of outsourcing. Some believe it has been around for a few thousand years. When societies and communities started to form, people were trading with each other and in a sense, those with a specialized profession were outsourcing their activities to others. Outsourcing became more evident during the industrial revolution and its oldest form is specialized machinery (Rosenblatt, 2002)."
